Human Resource Audit

Human Resource Audit is a systematic assessment of the strengths, limitations, and developmental needs of its existing human resources in the context of organizational performance. (Flamholtz, 1987)

Regardless of the type of company or the size of your HR department, the HR Audit is a simple, yet comprehensive tool to analyze and improve your effectiveness as a function.

HR Audit means the systematic verification of job analysis and design, recruitment and selection, orientation and placement, training and development, performance appraisal and job evaluation, employee and executive remuneration, motivation and morale, participative management, communication, welfare and social security, safety and health, industrial relations, trade unionism, and disputes and their resolution.

According to Dale Yoder

It refers to the evaluation and examination of policies, practices and procedures to determine the effectiveness and efficiency of human resource.

Human Resource Audit (HRA): What it does?

The premise on which the human resource audit is based is that opportunities are being missed by staying with the current approaches. It considers the human resource process as dynamic and that it must continually be redirected and revitalized to be responsive to the ever changing needs.

HRA is a sort of feedback on the duties and working of the managers and other employees of the organization. It is a sort of quality control of the human resource of an organization. HRA can be conducted for a department or the whole organization. It gives a more professional image and helps in bringing out the problem not necessarily linked with the Human Resource division of an organization. HRA helps clarify a department’s role in an organization and brings about more uniformity in action.

Human Resource Audit is the critical analysis of the existing human resource within the organization. To be able to do that, the audit will have to be served with the data that is quantitative, qualitative, as well as comprehensive. In other words, the success of this stage of human resource planning solely rests upon the manner in which personnel records and other information are maintained. It is from the base of the current situation that the human resource audit is to take-off in order that the future must be planned. Hence, the information needs of such a critical exercise must be met.

Audit Process

The audit is made up of four main steps:

  1. Define desired HR practices for your organization
  2. Assess current practices against the criterion that you have established
  3. Analyze the results
  4. Establish improvement goals and take action

This simple four-step approach can be repeated as the annual planning and goal setting process occurs within your company. Progress can be measured against goals and a continuous improvement cycle naturally unfolds

1. Define desired HR practice

Definition of desired HR practices can occur through in a variety of ways. A good starting point is to take some time and reflect on the legal requirements and programs that the department must administer. Simply listing them is a good first step.

With this list in hand, a statement can be written about each major practice that you want to define. Typically, they are stated in the present tense and in a positive manner. The following examples illustrate these traits:

  • The staffing process is documented so that the responsibility of each person in the process is clear and understood.
  • Performance appraisals are completed for each employee in the organization.
  • There is a train-the-trainer program for each major training program within the company.
  • New employees complete a new hire orientation program of key company policies and procedures within the first 30 days of work.
  • There is an issue resolution process that is well understood and used by employees

2. Assess current practices

With the list of statements completed, the assessing current practices requires you to be objective. A good approach is to look for evidence that supports or refutes each statement made. Evidence may take the form of policies and procedures, output from employee surveys, interviews with key customers, data collection from a Human Resource Information System, reports issued to regulatory departments, statistics, etc…

The first time the assessment is made, it may become apparent that the definition in step one needs improvement or modification. These changes should be noted and made a part of the next “improvement cycle.”

3. Analyze the results

It is important to recognize strengths and opportunities for improvement. As results are reviewed, themes will emerge around specific HR areas. For example, one company may be very strong in administration and managing legal requirements. On the other hand, it may need improvement in developing higher-level systems definition. Another company may be very strong in areas Safety, Security, and Training, but need improvement in Communication practices that run across the company

Reviewing the data in a variety of perspectives is helpful to formulate a picture of overall HR performance against the audit. It can reflect the positive effect of actions taken in previous years as well as provide information for future actions

4. Establish Improvement Goals and Take Actions

The ideal time to complete an audit is just prior to the annual planning process. With audit information in hand, you can be poised to take advantage of your insights into setting next year’s goals.

There are two aspects of setting goals: maintenance of current good practices and development of improved practices. Knowing the capacity and capability of the HR department and system is critical in developing a realistic plan. Good practices need to become a part of the HR system and ‘baked in’, so that they occur in a reliable, predictable fashion. Once a process or program has reached that level, then future development can occur more effectively.

Scope of HR Audit

  • Audit of all the HR functions.
  • Managerial compliance audit.
  • Human resource climate audit.
  • Human resource corporate strategy audit.

Benefits of HRA

  • Helps to find out proper contribution of HR department towards the organization.
  • Reduce the HR cost.
  • Motivation of HR personnel.
  • Find problems of HR and solve them.
  • Sound performance appraisal system.
  • Systematic job analysis.
  • Clarification of HR department duties and Responsibilities.

Objective of HRA

  • Building Organization structure.
  • Proper communication and feedback.
  • Status of industrial relation manager.
  • Evaluate implementation of policies.
  • Evaluate performance of personnel staff.
  • Seek information of failure and success of HR.
  • Seek priorities and goals of management philosophy.
  • Greater delegation of authority.

Conclusion

The auditors always prepare and submit an audit report to authority of the organization, which may be clean or qualified. The clean report indicates the appreciative of the department’s function, but the latter one represents the gaps in performance and therefore contains remarks and remedial measures. HR Audit is very much helpful to face the challenges and to increase the potentiality of the HR personnel in the organization.

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